Airlangga Hartarto, Minister of Industry: Interview

Interview: Airlangga Hartarto

What is your view of the challenges facing the expansion of industrial activity in Indonesia?

AIRLANGGA HARTARTO: The industrial sector is aware that the global economy is facing challenging times. What we are looking to do is to further enhance Indonesian industry under the challenge of lower economic growth. Our emphasis in the beginning will first be on the export side, promoting export-orientated industry that is more labour intensive. The next step will be promoting the manufacturing sector, which is one of nine sectors to be developed.

Focus areas are food and beverages; chemicals and pharmaceuticals; electronics for domestic use as well as export; automotive and related materials, including steel; textiles and apparel; resource-based industries such as agriculture, agro-industry and minerals-based industry; and the digital economy.

What priorities have been established to further industrialisation across the archipelago?

HARTARTO: Our main goal is to improve workers’ capabilities by developing technical skills through vocational training. The Ministry of Industry is pushing for linkages between the needs of industrial development and the availability of education. Therefore, technical training and vocational schools are at the centre of our policy to develop our people’s capabilities, as well as push for new entrepreneurship. If people have skills, then they are able to see opportunities.

Furthermore, the Ministry of Industry has built and is operating nine vocational schools, nine polytechnics and a community college. We are now in ongoing process to build more polytechnics and community colleges in industrial estates, each with a focus on different clusters of industry, in order to supply skilled workers to these estates. For instance, we established a polytechnic community college in North Sumatra focused on the palm oil industry and a polytechnic college in Sulawesi based on the metals industry. We are also planning to build a polytechnic college in Papua which will concentrate on the petrochemicals industry. The goal is for each and every area of industrial development in each of the country’s special economic zones to have polytechnic and vocational schools that will be available to support industrialisation in that area.

Our aim is to develop people, further structure industry value chains and develop industrialisation beyond Java and throughout Indonesia. In Sumatra we are developing palm oil bases as well as a manufacturing centre in Medan for related products. In Kalimantan we have been developing the gasification of coal, as well as pushing for a palm oil base. In central Sulawesi we are developing ferronickel production, and we plan to produce 5m tonnes of stainless steel in 2017 from two plants in the area. This will make Indonesia the second-largest producer of the material in the world after China, while the whole of Europe produces just 4m tonnes of stainless steel per year. In Papua we will base development on the gas and petrochemicals industries.

How can Indonesia attract more foreign direct investment to the industrial sector?

HARTARTO: Indonesia has a large domestic market and it is the largest economy in ASEAN, which guarantees access to more than 500m people. Through the deregulation that the government is keen to push, there has been more and more investment coming to the archipelago in recent years. We are currently developing 14 industrial estates where investors go through a simplified investment procedure in order to build their factories. They have access to quick licensing when obtaining the company name, tax registration numbers and the building permit.

As long as they make an investment in the economic zone, investors can get the permit within three or four hours. The electricity is already there, the harbour is already there and the land is also available – investors typically don’t have any hassle with other constraints.